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Allianz Annual Report 2012

the extent of the interest in the associate or joint venture. Accounting policies of associated enterprises and joint ven- tures have been adjusted where necessary to ensure con- sistency with the accounting policies adopted by the ­Allianz Group. In the event that significant influence or joint control over an associate or jointly controlled entity is lost, a gain or loss equal to the difference between (i) the sum of any proceeds from interests disposed of, fair value of any interests re- tained and any amounts reclassified from equity and (ii) the carrying amount of the investment at the date signifi- cant influence or joint control was lost, is recognized in profit or loss. FOREIGN CURRENCY TRANSLATION Translation from any foreign currency into functional currency The individual financial statements of each of the ­Allianz Group’s subsidiaries are prepared in the prevailing cur- rency in the primary economic environment where the subsidiary conducts its ordinary activities (its functional currency). Transactions recorded in currencies other than the functional currency (foreign currencies) are recorded at the exchange rate prevailing on the date of the transac- tion. At the balance sheet date, monetary assets and liabil- ities denominated in foreign currencies are translated into the functional currency using the closing exchange rate. Non-monetary assets and liabilities denominated in for- eign currencies that are measured at historical cost are translated at historical rates and non-monetary items that are measured at fair value are translated using the closing rate. Foreign currency gains and losses arising from foreign currency transactions are reported in income from finan- cial assets and liabilities carried at fair value through in- come (net), except when the gain or loss on a non-mone- tary item measured at fair value is recognized directly in other comprehensive income. In this case, any foreign ex- change component of that gain or loss is also directly rec- ognized in other comprehensive income. Translation to the presentation currency For the purposes of the consolidated financial statements, the results and financial position of each of the ­Allianz Group’s subsidiaries are expressed in Euro, the presenta- tion currency of the ­Allianz Group. Assets and liabilities of subsidiaries not reporting in Euro are translated at the clos- ing rate on the balance sheet date and income and expens- es are translated at the quarterly average exchange rate. Associated enterprises and joint ventures Associated enterprises are entities over which the ­Allianz Group can exercise significant influence and which are neither subsidiaries nor joint ventures. Significant influ- ence is the power to participate in, but not to control, the financial and operating policies of an enterprise. Signifi- cant influence is presumed to exist where the ­Allianz Group has at least 20 % but not more than 50 % of the voting rights, unless it can be clearly demonstrated that this is not the case. If the ­Allianz Group holds less than 20 % of the vot- ing power of the investee, it is presumed that the ­Allianz Group does not have significant influence unless such in- fluence can be clearly demonstrated. In general, the ­Allianz Group accounts for its investments in limited partnerships with ownership interests of 20 % or greater using the equity method due to the rebuttable presumption that the limited partner has no control over the limited partnership. Joint ventures are entities over which the ­Allianz Group and one or more other parties have joint control. Investments in associated enterprises and joint ventures are generally accounted for using the equity method of ac- counting, in which the results and the carrying amount of the investment represent the ­Allianz Group’s proportion- ate share of the entity’s net income and net assets, respec- tively. The investments are initially recognized at cost. The positive difference between the cost of the investment and the ­Allianz Group’s share of the net fair value of the associ- ate’s or joint ventures identifiable assets and liabilities is accounted for as goodwill and included in the carrying amount of the investment. The carrying amount of the in- vestment is subsequently increased or decreased to recog- nize the ­Allianz Group’s share in profit or loss after the date of acquisition. The investments are tested for impairment when respective triggering events occur. Any impairment loss will correspond to the excess of the investment’s car- rying amount over its recoverable amount. In general, the triggering events are similar to those used for impairment testing for financial instruments while the measurement of impairment losses is similar to the measurement of im- pairment losses for other assets. The ­Allianz Group accounts for all material investments in associates on a time lag of no more than three months. In- come from investments in associated enterprises and joint ventures, which reflects the earnings rather than the distri- butions of the associate or jointly-controlled entity, is in- cluded in interest and similar income. Profits or losses re- sulting from transactions between the ­Allianz Group and the associated enterprise or joint venture are eliminated to Annual Report 2012    Allianz Group228

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